IS-MP Analysis: Interest Rates and Output-End of hapter Problem Use the chart to answer the questions. Year Potential GDP Real GDP 2017 S18.05 trillion S18.56 trillion $18.17 trillion 2018 $18.51 trillion Be sure to put your answer in percentage form, and round answerns to two decimal places. a. Calculate the output gap for 2017. b. Calculate the output cap for 2018. Be sure to put your answer in percentage form, and round answers to two decimal places. a. Calculate the output gap for 2017. b. Calculate the output gap for 2018. e. From 2017 to 2018, the output gap became more

IS-MP Analysis: Interest Rates and Output-End of hapter Problem Use the chart to answer the questions. Year Potential GDP Real GDP 2017 S18.05 trillion S18.56 trillion $18.17 trillion 2018 $18.51 trillion Be sure to put your answer in percentage form, and round answerns to two decimal places. a. Calculate the output gap for 2017. b. Calculate the output cap for 2018. Be sure to put your answer in percentage form, and round answers to two decimal places. a. Calculate the output gap for 2017. b. Calculate the output gap for 2018. e. From 2017 to 2018, the output gap became more

Principles of Economics (MindTap Course List)

8th Edition

ISBN:9781305585126

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter34: The Influence Of Monetary And Fiscal Policy On Aggregate Demand

Section: Chapter Questions

Problem 4CQQ

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What is says law?
Suppose the government borrows $20 billion more next year than this year. a. Use a supply-and-demand diagram to analyse this policy. Does the interest rate rise or fall? b. What happens to investment? To private saving? To public saving? To national saving? Compare the size of the changes to the $20 billion of extra government borrowing. c. Suppose households believe that greater government borrowing today implies higher taxes to pay off the government debt in the future. What does this belief do to private saving and the supply of loanable funds today? Does it increase or decrease the effects that you discussed in parts (a) and (b)?
4. A country’s consumer spending is defined by the following equation:Consumer spending = 365 + 0.75 (Disposable Income)a. Draw a diagram to represent this equation. b. Assuming no government, what will the Marginal Propensity to Save (MPS) in this country.c. What will be Consumer spending if disposable income in this country is 1000? d. If suddenly this country’s wealth increases, how do you think the equation might change.Also show it in a diagram.
Labor Market Y = α (5N – 0.0025N2), where α = 2; N = labor The supply of labor, NS isNS = 55 + 10(1-t)w where t- tax rate = 0.5, w = real wage rate Good Market The desired consumption, Cd is Cd = 300 + 0.8(Y – T) – 200rWhere Y = income, T = taxes, r = real interest rate T= 20 + 0.5YG= 50Desired investment, Id:Id = 258.5 – 250r Money Market Demand for money, Md/P: Md/P = 0.5Y – 250(r + πe), where πe = 0.02 (expected inflation) Money supply = Ms = 9150 a)Find the equilibrium w, Y and N.b)Find the IS-curve and the equilibrium r, C and I.c)Find the LM-curve and the equilibrium P.d)If G increased to 72.5, find the equilibrium w, P, N, r, C and I.e)Discuss the differences between the equilibrium values in d) with a), b) and c). What is your conclusion with regard to the effectiveness of fiscal policy in this model?
A closed economy is represented by: Y = C+1+G C = 20+0.85YD G = 300 YD = Y-T T = 0.2Y I = 165-36i Md = 0.5Y-100i M3 = 750 a)Calculate equilibrium values of income and interest rate b)Calculate equilibrium values of income and interest rate if public expenditures increase by 8, enhanced by public debt c)Calculate equilibrium values of income and interest rate if public expenditures increase by 8 is enhance by money supply d)Provide a graphical representation of your results
Given the following information: Consumption: 100 + 0.8 Yd Investment: 150 – 16i Govt. expenditure: 100 Taxes: 0.25Y DD for money: 0.2Y – 2i Nominal money supply: 300 Price level: 2 a) Determine equilibrium level of income and rate of interest b) If govt expenditure increases by 50, what will be the new equilibrium of income and the rate of interest? c) Is there any crowding out? If yes, what is the extent of crowding out of income?